Main Article Content
The study of market integration is important in determining the co movement of prices and the transmission of price signals and the information across spatially separated markets. This study describes growth rates in retail prices, examines long- run price equilibrium in local rice markets, determines markets that exhibit leadership position in price formation and transmission of spatial separated markets integration of the different pairs of markets in Nigeria for both local rice varieties and imported rice varieties. Examining the extent of interregional market integration, both spatial and across marketing stages will provide insights on the speed of trader responses in moving this vital commodity from surplus to deficit areas, especially in the face of high demand.
The data used for the analysis were collected from National Bureau of Statistics, Abuja, from January 2001 to December 2010 (120 months) per state. Eighteen spatially separated (urban) markets across six geopolitical zones in Nigeria were selected based on their development. Augmented Dickey Fuller (ADF), Johansen Co integration technique, Granger Causality test and Vector Error Correction Model (VECM) were the analytical techniques employed.
The results of the local rice markets growth rates were highest in Bayelsa (86.15%) in 2003, followed by Lagos (72.01%) in 2005 and Bauchi (45.83%) in 2007. The empirical results revealed that price series variables became stationary after first differences. The results of Johansen Co- integration analysis revealed that 71.90% of the local rice markets showed long- run price equilibrium despite the divergence in prices. The results of Johansen multiple co integration also affirmed the co integration results among local rice markets. The results of Granger causality tests were both uni- directional and bi- directional, indicating the markets that show leadership position in price formation and transmission from one market to the other. The results of VECM revealed moderate short-run price equilibrium in the local rice markets.
In conclusion, the price signal were transmitted across spatially separated markets for locally planted rice, thus indicating integration of local rice markets across the six geopolitical zones in Nigeria. Therefore, adequate investment in local rice varieties will remove the drain in the nation’s foreign exchange.